The post-holiday reversal was in play as stocks fell Monday after being up during the three sessions leading up to the 4th of July. The Dow lost a modest 44-points but the the broader indices took more of a hit with small caps taking the brunt of the damage as the Russell 2000 dropped 1.8% on the day.
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The I-fund lost .71% and bonds saw a modest gains.
Earnings season kicks off with Alcoa after the close today, and while not usually a market mover, it give us an idea what kind of mood investors will be in after such a big rally leading into earnings. There are certainly some profits to take for those who don't want to wait to see the results.
The SPY (S&P 500 / C-fund) saw a minor 0.35% loss closing off the lows yesterday as buyers did step up some yesterday. Just not with any conviction. We have seen these 2 to 3 day dips during this recent rally for the last several months and everyone turned out to be buying opportunities. Will it be different this time?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 took a hit yesterday making its 1.8% loss the worst since April so perhaps it is different this time. It is resting on the rising support line after filling its small open gap, so now would be a good time for it to stop falling. As we talked about all last week, many times the action before a holiday is reversed after a holiday and the loss in the Russell 2000 on Monday actually did take back ALL of last week's gains.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The loss in the small caps rolled over into the Wilshire 4500 (S-fund) and while the Wilshire did not give back all of last week's gains, it did give back all of the gains from the first three trading days in July. There is some support in the area where it closed on Monday and that is obviously the first level to watch.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The action in some of the European markets continues to get interesting. The DAX, which is the leader over there, has fallen back from a triple top. Perhaps it is just creating another, albeit smaller, bullish inverted head and shoulders pattern, in which case it may be in the right shoulder (RS)now.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
France's CAC 40 Index broke down from a bear flag yesterday and is testing the late June low. This one doesn't look good, and as I mentioned last week, the French economy seems to be entering another recession and we may be seeing this market top. The fear of course would the impact of possible contagion across the rest of Europe.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Bonds were up slightly yesterday as the IEF looks to be trying to fill some of the overhead open gaps. There won't be a new official descending resistance line drawn in until we see a lower low on the chart.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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